Jake Sullivan and Janet Yellin on ... a "New Washington Consenus"? (2 of 2)
The recent speeches by Treasury Secretary Janel Yellin1 and National Security Adviser Jake Sullivan2 seem to be signaling an interesting and at least partly constructive turn in the dominant rhetoric on international economics coming from Washington. Yellin’s speech is most notable for her assertion that the US was not aimed at “decoupling” itself from China economically. And Sullivan made the same point. Christina Lu describes this as “the Biden administration’s latest effort to define its economic approach toward China and reassure European allies that have grown wary of the increasingly hawkish U.S. position.”3
But Sullivan’s speech also suggests a broader turn away from the neoliberal ideology dominant in the West since 1989 or so. Though even among Democrats, this is not a completely new shift. The national politics in the US even in 2016 was backing away from the dogmatic gospel of corporate-deregulation trade treaties.4 Quinn Slobodian recently mentioned that Hillary Clinton’s dropping her support of the proposed TPP (Trans Pacific Partnership) treaty was an important turning point.5 He also addresses Jake Sullivan’s speech and how the habit of justifying economic shifts by reference to foreign competitionc an be problematic.
Sullivan describes the post-Second World War is the usual American triumphalist rhetoric in which the US practically single-handedly “led a fragmented world to build a new international economic order” that “lifted hundreds of millions of people out of poverty.” He uses the phrase “a foreign policy for the middle class,” which Biden has been using before.
But I’ll be curious how the pundits and lobbyists will react to his explicit revival and endorsement of the term “industrial strategy,” a term that has long been effectively taboo in American national politics. In the 1980s, it was also called “industrial policy.”
As the background for this, he defines recent times in terms that we would expect more from Bernie Sanders than from Joe Biden or Hillary Clinton:
But the last few decades [at least the last 30 years?!?] revealed cracks in those foundations. A shifting global economy left many working Americans and their communities behind.
A financial crisis shook the middle class. A pandemic exposed the fragility of our supply chains. A changing climate threatened lives and livelihoods. Russia’s invasion of Ukraine underscored the risks of overdependence.
So this moment demands that we forge a new consensus.
On its face, this tosses out the post-Cold War standard rhetoric with the End of History, “shock therapy” for former socialist countries, and the paradise of international Free Trade.
The phrase Washington Consensus isn’t used very much in normal American political rhetoric except by foreign policy wonks, though leaders in the rest of the world are very aware of it. It refers to general neoliberal gospel of privatization, deregulation, financialization of economies, austerity in public services, general hostility to the social-democratic/welfare-state model, corporate-deregulation “trade” treaties, and a ruthless approach to countries experiencing sovereign-debt crises.
So it’s attention-grabbing when Sullivan says:
Now, the idea that a “new Washington consensus,” as some people have referred to it, is somehow America alone, or America and the West to the exclusion of others, is just flat wrong.
This strategy will build a fairer, more durable global economic order, for the benefit of ourselves and for people everywhere.
We can’t read too much into a general statement like this. For one thing, speculation about a "new" Washington Consensus has been around for a while.6 But on its face, it does sound like a turn away from the neoliberal “globalization” agenda7 and a simultaneous rejection of the MAGA/American First narrow nationalist approach.
But if I had seen the following three paragraphs without the source cited, I might have thought it was coming from In These Times or The American Prospect or Jacobin rather than from the US National Security Adviser:
The vision of public investment that had energized the American project in the postwar years—and indeed for much of our history—had faded. It had given way to a set of ideas that championed tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself.
There was one assumption at the heart of all of this policy: that markets always allocate capital productively and efficiently—no matter what our competitors did, no matter how big our shared challenges grew, and no matter how many guardrails we took down.
Now, no one—certainly not me—is discounting the power of markets. But in the name of oversimplified market efficiency, entire supply chains of strategic goods—along with the industries and jobs that made them—moved overseas. And the postulate that deep trade liberalization would help America export goods, not jobs and capacity, was a promise made but not kept.
Another embedded assumption was that the type of growth did not matter. All growth was good growth. So, various reforms combined and came together to privilege some sectors of the economy, like finance, while other essential sectors, like semiconductors and infrastructure, atrophied. Our industrial capacity—which is crucial to any country’s ability to continue to innovate—took a real hit. [my emphasis]
I guess it’s not just hippies who are saying stuff like this any more!
He lumps all this under the problem of the hollowing-out of the US industrial base.
He then proceeds to debunk the notion that “economic integration would make nations more responsible and open, and that the global order would be more peaceful and cooperative.“ The hope that international trade would make international war less likely was a great hope of pre-First World War pacifists and anti-imperialists, as well.
Rejecting that very notion was a major part of the pre-First World War Social Democrats like Rudolf Hilferding (who later served twice as German Finance Minister during the Weimar Republic) were so strongly opposed to their countries’ entering the First World Wat, or the Great War as it was then called. They saw that international economic competition could increase the likelihood of wars between major powers. Hilferding argued “that the banks’ increasing influence over industry led to monopoly and cartels and through them to economic imperialism and war.”8
Now, I doubt Jake Sullivan has been spending a lot of time reading Hilferding lately. But that statement is also a dramatic departure from the lazy conventional Western wisdom of the post-1989 era.
He continues with some more fairly convention Democratic rhetoric on climate change, e.g., “America needs a deliberate, hands-on investment strategy to pull forward innovation, drive down costs, and create good jobs.” But the Inflation Reduction Act of 2022 actually does represent a substantially increased effort in that direction, enough to scare EU leaders into thinking they need to make a more aggressive push toward renewable energy.
And he admits - another heresy against the neoliberal faith! - that the “gains of [international] trade” actually “failed to reach a lot of working people. The American middle class lost ground while the wealthy did better than ever.” And he elaborates with what on its face is an indictment of the dominant policies of administrations of both parties since at least Ronald Reagan:
[T]he drivers of economic inequality—as many of you know even better than I—are complex, and they include structural challenges like the digital revolution. But key among these drivers are decades of trickle-down economic policies—policies like regressive tax cuts, deep cuts to public investment, unchecked corporate concentration, and active measures to undermine the labor movement that initially built the American middle class. [my emphasis]
Although he does make a rhetorical gesture of claiming that the Obama Administration might have been serious about trying to reverse those trends. (That would be the Obama Administration of the Grand Bargain9 and the Simpson-Bowles Let-Grandma-Eat-Catfood Commission10.)
Sullivan elaborates further on Janet Yellin’s comments about managing competition and cooperation with China, saying:
We’ve implemented carefully tailored restrictions on the most advanced semiconductor technology exports to China. Those restrictions are premised on straightforward national security concerns. Key allies and partners have followed suit, consistent with their own security concerns.
We’re also enhancing the screening of foreign investments in critical areas relevant to national security. …
A word on China more broadly. As [EU Commission] President [Ursula] von der Leyen put it recently, we are for de-risking and diversifying, not decoupling. We’ll keep investing in our own capacities, and in secure, resilient supply chains. We’ll keep pushing for a level playing fi eld for our workers and companies and defending against abuses.
Our export controls will remain narrowly focused on technology that could tilt the military balance. We are simply ensuring that U.S. and allied technology is not used against us. We are not cutting off trade. …
We’re looking to manage competition responsibly and seeking to work together with China where we can. President Biden has made clear that the United States and China can and should work together on global challenges like climate, like macroeconomic stability, health security, and food security. [my emphasis]
Sullivan’s and Yellin’s speeches didn’t come attached to major new legislative initiatives. This is not surprising in light of the fact that the still-insurrection-minded Republican Party now controls the House of Representatives.
And it’s also safe to assume that both speeches are in part “trial balloons,” meant to measure the reaction from various constituencies.
But certainly on a rhetorical level, these speeches represent a real departure, in a mostly positive way, from the dominant neoliberal assumptions of the Clinton and Obama Administrations. And that’s good to see.
Remarks by Secretary of the Treasury Janet L. Yellen on the U.S. - China Economic Relationship at Johns Hopkins School of Advanced International Studies. Department of the Treasury website 04/20/2023. <https://home.treasury.gov/news/press-releases/jy1425#:~:text=As%20I've%20said%2C%20the,the%20rest%20of%20the%20world.> (Accessed: 2023-29-04).
Remarks by National Security Advisor Jake Sullivan on Renewing American Economic Leadership at the Brookings Institution. Sullivan, Jake (2023): Remarks by National Security Advisor Jake Sullivan on Renewing American Economic Leadership at the Brookings Institution. White House website 04/27/2023. <https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/04/27/remarks-by-national-security-advisorjake-sullivan-on-renewing-american-economic-leadership-at-the-brookings-institution/> (Accessed: 2023-29-04).
The Biden administration’s international economic agenda: National Security Advisor Jake Sullivan. Brookings Institution YouTube channel 04/27/2023. (Accessed: 2023-29-04).
Lu, Christina (2023): Washington Doesn’t Want You to Call it Decoupling. Foreign Policy 04/27/2023. <https://foreignpolicy.com/2023/04/27/us-china-economy-technology-sullivan-yellen/> (Accessed: 2023-30-04).
Roberts, Dan & Ryan Felton, Ryan (2016): Trump and Clinton's free trade retreat: a pivotal moment for the world's economic future. The Guardian 08/20/2016. <https://www.theguardian.com/us-news/2016/aug/20/trump-clinton-free-trade-policies-tpp> (Accessed: 2023-01-05).
Rodrik, Dani (2008): Is There a New Washington Consensus? Project Syndicate 01/11/2008, <http://www.project-syndicate.org/commentary/is-there-a-new-washington-consensus> (Accessed: 2023-30-04).
Radical rightists internationally have taken to using the term “globalist” to refer to a vague Jewish conspiracy. But “globalization” is a broadly used concept for enthusiasts, critics, and opponents of the process. See., e.g., Stiglitz, Joseph (2016): Globalization and its New Discontents. Project Syndicate 08/05/216. <https://www.project-syndicate.org/commentary/globalization-new-discontents-by-joseph-e--stiglitz-2016-08> (Accessed: 2023-30-04).
Editors (2023): Rudolf Hilferding. Britannica Online 01/28/2023. <https://www.britannica.com/biography/Rudolf-Hilferding> (Accessed 2023-30-04).
Pareene, Alex (2013): The undead, unnecessary, unhelpful Grand Bargain. Salon 03/11/2013. <https://www.salon.com/2013/03/11/the_undead_unnecessary_unhelpful_grand_bargain/> (Accessed: 2023-30-04).
Blice, Carl (2012): Obama & the Democrats Sending Mixed Messages about the Catfood Commission. LA Progressive 09/14/2012. <https://www.laprogressive.com/economic-equality/catfood-commission> (Accessed: 2023-30-04).